DBRS Morningstar Finalizes Provisional Ratings on CIM Trust 2022-R2

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage-Backed Notes, Series 2022-R2 (the Notes) issued by CIM Trust 2022-R2 (CIM 2022-R2 or the Trust):

-- $380.4 million Class A1 at AAA (sf)
-- $32.8 million Class A2 at AAA (sf)
-- $27.7 million Class M1 at A (high) (sf)
-- $19.3 million Class M2 at BBB (high) (sf)
-- $13.7 million Class B1 at BB (high) (sf)
-- $8.9 million Class B2 at BB (sf)

The AAA (sf) rating on the Notes reflects 18.70% of credit enhancement provided by subordinated Notes in the transaction. The A (high) (sf), BBB (high) (sf), BB (high) (sf), and BB (sf) ratings reflect 13.25%, 9.45%, 6.75%, and 5.00% of credit enhancement, respectively.

Other than the classes specified above, DBRS Morningstar does not rate any other classes in this transaction.

This transaction is a securitization of a portfolio of primarily seasoned performing and reperforming first-lien residential mortgages funded by the issuance of mortgage-backed notes (the Notes). The Notes are backed by 2,491 loans with a total principal balance of $508,212,018 as of the Cut-Off Date (April 30, 2022).

The loans are approximately 163 months seasoned. As of the Cut-Off Date, 97.9% of the pool is current, 1.0% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method, and 1.1% is in bankruptcy. (All bankruptcy loans are performing or 30 days delinquent.) All loans reported as delinquent due to servicing transfers were treated as current by DBRS Morningstar. Approximately 83.2% and 62.8% of the mortgage loans have been zero times (x) 30 days delinquent for the past 12 months and 24 months, respectively, under the MBA delinquency method.

In the portfolio, 79.6% of the loans are modified. The modifications happened more than two years ago for 88.5% of the modified loans. Within the pool, 983 mortgages have non-interest-bearing deferred amounts, which equate to 7.6% of the total principal balance. Unless specified otherwise, all statistics on the mortgage loans in this report are based on the current balance, including the applicable non-interest-bearing deferred amounts.

The majority of the pool (86.6%) is exempt from the Consumer Financial Protection Bureau (CFPB) Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules. The loans subject to the ATR rules are designated as QM Safe Harbor (2.1%), QM Rebuttable Presumption (4.0%), and non-QM (7.3%) by UPB.

Fifth Avenue Trust (the Seller) acquired the mortgage loans prior to the Cut-Off Date and, through a wholly owned subsidiary, Funding Depositor LLC (the Depositor), will contribute the loans to the Trust. As the Sponsor, Chimera Investment Corporation (Chimera) or one of its majority-owned affiliates will acquire and retain a 5% eligible horizontal residual interest in the Notes, consisting of all of the Class B1, B2, B3, and C Notes in the aggregate, to satisfy the credit risk retention requirements. Various entities originated and previously serviced the loans through purchases in the secondary market.

Prior to CIM 2022-R2, Chimera had issued 48 seasoned securitizations under the CIM shelf since 2014, all of which were backed by subprime, reperforming, or nonperforming loans. DBRS Morningstar has rated five of the previously issued CIM reperforming loan (RPL) deals. Similar to the last DBRS Morningstar-rated CIM RPL deal, this transaction exhibits much stronger credit characteristics than previously issued transactions under the CIM shelf. DBRS Morningstar reviewed the historical performance of both the rated and unrated transactions issued under the CIM shelf, particularly with respect to the reperforming transactions, which may not have collateral attributes similar to CIM 2022-R2. The reperforming CIM transactions generally have delinquencies and losses in line with expectations for previously distressed assets.

The loans will be serviced by Fay Servicing, LLC (Fay; 72.1%) and Select Portfolio Servicing, Inc. (SPS; 27.9%). There will not be any advancing of delinquent principal or interest on any mortgages by the Servicers or any other party to the transaction; however, the related Servicer is obligated to make advances in respect of homeowner's association fees, taxes, and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

On the earlier of the Payment Date occurring in May 2027, or after the Payment Date when the aggregate note amount of the offered Notes is reduced to 10% of the Closing Date note amount, the Call Option Holder (the Depositor or any successor or assignee) has the option to purchase all of the mortgage loans and any real estate owned (REO) properties at a certain purchase price equal to the unpaid principal balance of the mortgage loans, plus the fair market value of the REO properties and any unpaid expenses and reimbursement amounts.

The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Notes, but such shortfalls on Class M1 and more subordinate bonds will not be paid from principal proceeds until the Class A1 and A2 Notes are retired.

Coronavirus Disease (COVID-19) Impact
The coronavirus pandemic and the resulting isolation measures have caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. Shortly after the onset of the pandemic, DBRS Morningstar saw an increase in the delinquencies for many residential mortgage-backed securities (RMBS) asset classes.

Such mortgage delinquencies were mostly in the form of forbearances, which are generally short-term periods of payment relief that may perform very differently from traditional delinquencies. At the onset of the pandemic, the option to forebear mortgage payments was widely available, driving forbearances to an elevated level. When the dust settled, loans with coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios (LTVs), and acceptable underwriting in the mortgage market in general. Across nearly all RMBS asset classes in recent months, delinquencies have been gradually trending downward, as forbearance periods come to an end for many borrowers.

As of the Cut-Off Date, there are no loans that are subject to an active coronavirus-related forbearance plan with any Servicer.

For more information regarding the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: Baseline Macroeconomic Scenarios For Rated Sovereigns March 2022 Update, dated March 24, 2022.

The DBRS Morningstar ratings of AAA (sf) addresses the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes. The DBRS Morningstar ratings of A (high) (sf), BBB (high) (sf), BB (high) (sf), and BB (sf) address the ultimate payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes.

The full description of the strengths, challenges, and mitigating factors is detailed in the related presale report.

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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